Frist Accumulated Stock Outside
Trusts
Yahoo News/AP
By LARRY MARGASAK and JONATHAN M. KATZ, Associated Press Writers
October 11, 2005
WASHINGTON - Outside the blind trusts he created to avoid a conflict of
interest, Senate Majority Leader Bill Frist earned tens of thousands of dollars
from stock in a family-founded hospital chain largely controlled by his
brother, documents show.
The Tennessee Republican, whose sale this summer of HCA Inc. stock is under
federal investigation, has long maintained he could own HCA shares and still
vote on health care legislation without a conflict because he had placed the
stock in blind trusts approved by the Senate.
However, ethics experts say a partnership arrangement shown in documents
obtained by The Associated Press raises serious doubts about whether the
senator truly avoided a conflict.
In that case, the HCA stock was accumulated by a family investment
partnership started by the senator's late parents and later overseen by his
brother, Thomas Frist. The brother served as president of the partnership's
management company and as a top officer of HCA. Sen. Frist holds no position
with the company.
The senator's share of the partnership was placed in a Tennessee blind trust
between 1998 and 2002 that was separate from those governed by Senate ethics
rules. Frist reported Bowling Avenue Partners, made up mostly of non-public HCA
stock, earned him $265,495 in dividends and other income over the four
years.
Edmond M. Ianni, a former Wilmington, Del., bank executive who established
blind trusts for corporate executives, questioned why the senator's brother was
able to manage assets "when the whole purpose of a blind trust is to ensure
lack of not only conflict of interest — but appearance of conflict of
interest?"
Kathleen Clark, a government ethics expert at the Washington University in
St. Louis School of Law, said she doesn't believe the Senate trusts or the
Tennessee trust insulated Frist from a conflict because the senator or his
brother were advised of transactions and could influence decisions.
"What I find most appalling is the Senate calls it a qualified blind trust
when it's not blind," Clark said. "Since the Senate says it's OK, the Senate
has made it a political question. It's up to the voter. But there's no doubt
it's a conflict of interest."
Frist's interest in Bowling Avenue Partners and the Tennessee blind trust
were listed on the annual disclosure reports he filed with the Senate. Thomas
Frist's ability to influence HCA stock decisions in the partnership was
detailed in separate trust and partnership documents obtained by the AP.
Those documents show Thomas Frist was listed as the "general partner" and
"registered agent" of Bowling Avenue Partners. He also was listed as president
of the partnership's management company.
Thomas Frist founded HCA, the nation's largest for-profit hospital chain,
with his and the senator's father. He currently is the company's chairman
emeritus.
Frist advisers confirmed the senator's brother could influence investment
decisions in the Bowling Avenue partnership and said the partnership was placed
in a Tennessee trust because Senate ethics rules didn't allow the non-public
HCA shares to be included in Senate-approved trusts.
"His interests in the family partnership were not held by his Senate blind
trusts because Senate rules did not permit it. Senator Frist did not control
the assets in this partnership and he annually disclosed his interests to the
public as required," Frist spokesman Bob Stevenson said.
Thomas Frist did not return repeated phone calls to his office at HCA
seeking comment.
Bowling Avenue Partners' HCA shares became marketable securities when the
estate of Frist's mother was settled in probate. Frist then began transferring
those shares in stages from the Tennessee blind trust to the Senate-approved
trusts in 2001 and 2002.
The value of all the transferred shares, calculated on the dates they went
into the Senate trusts, was between $775,000 and $1.57 million, according to
letters the trustees sent to Frist and the Senate. That stock was on top of
millions of dollars in various investments Frist already owned in the Senate
blind trusts.
With his background as a heart surgeon as well as majority leader, Frist has
been at the forefront of legislation that would affect the hospital chain.
Among the issues: a Medicare prescription drug benefit and limits on medical
malpractice lawsuits.
Frist kept HCA stock in Bowling Avenue Partners and the Tennessee blind
trust — but outside the Senate-approved trusts — between 1998 and
2002.
His investments in Nashville-based HCA are being investigated by federal
prosecutors and the Securities and Exchange Commission after an AP report that
the senator had asked administrators of his Senate blind trusts to sell his HCA
holdings.
Frist ordered the stock sold June 13 and all sales were completed by July 1.
HCA stock peaked on June 22 and then gradually declined. On July 13, it dropped
9 percent.
Reports to the SEC showed insiders sold about 2.3 million shares of HCA
stock worth at least $112 million from January through June 2005.
Frist has denied having insider company information when he ordered the
stock sold in June. The profit the senator made from the sales is not
known.
The Bowling Avenue name came from the street of the Frist family home in
Nashville.
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